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Journalism of Courage
With interest rates rising and equity markets being increasingly volatile,investors are favouring fixed maturity plans (FMPs) for higher returns,experts said.
Fund managers are also advising investors to keep an FMP in their portfolio since the close-ended debt schemes with a predetermined maturity date generate steady returns.
The FMPs invest in money market instruments,corporate debt and government securities.
Conventionally,FMPs give slightly better return than bank fixed deposits. “In a rising interest rate scenario,risk averse investors are putting in money in such schemes of shorter duration,” DSP BlackRock Mutual Fund Head of Sales Ajit Menon said.
Besides,FMPs also offer benefits like tax efficiency and fixed tenure. The minimum investment amount is usually Rs 5,000,which is quite affordable from the point of view of retail investors.
“We are advising investors to go for accrual products in the nature of FMPs and liquid fund. However,if the investor is coming in for longer duration and has high risk appetite they should go for bond funds,” SBI Mutual Fund’s Fund Manager Rajeev Radhakrishnan said.
Radhakrishnan said the interest rates have peaked and he expects another 50 basis points hike during the year.
Menon also made a case for investors maintaining a hybrid portfolio with a balance of equity and fixed income plans.
“Post the global crisis in 2008,it is better for investors to go for balanced funds and leave it to the fund managers to decide where to invest,” Menon added.
